Eligibility for financial subsidy – tax incentive for foreign talents
The governments of nine cities in Guangdong agreed to grant foreign or overseas talents financial subsidy through a tax incentive on their personal income tax. According to the notice, if the personal income tax paid by the foreign talent exceeds 15 percent, he or she will get the portion of exceeding amount by means of a subsidy from the municipal government. This tax incentive is effective from January 1, 2019, until December 31, 2023.
On the other hand, the income tax refers to the six types of personal income tax including:
- Income from wages and salaries;
- Income from labor service remuneration;
- Proceeds from remuneration;
- Income from royalties;
- Operating income;
- Subsidized income obtained from selected talent projects or talent projects.
How to calculate the subsidy?
Subsidy amount = [total amount of IIT payment (eligible taxable income x 45%)] – [eligible taxable income x 15%]
*45 percent is the highest taxable income rate in GBA.
For an annual income of RMB 1,000,000
RMB 300,000 = [RMB 450,000 (RMB 1,000,000 x .45%)] – [RMB 1,000,000 x 15%]
Basic qualifications of foreign talent
- Permanent residents of Hong Kong;
- Taiwan residents;
- Foreign nationals;
- HK residents under the HK Immigration Program for talents, professionals, and entrepreneurs;
- Overseas students or overseas Chinese who have returned and obtained a long-term residency abroad;
- Must be working in the nine cities mentioned and a law-abiding resident having no delinquency in tax payments.
Along with the above qualifications, the foreign talent must also meet the following conditions to be considered for the preferential tax treatment:
- Recognized by the state, provincial and municipal authorities as a high-end foreign talent and obtained a Class A foreigner’s work permit or high-level talent card;
- A member of a scientific and research team of a major innovation project at the local and national level; with core technical skills and managerial position or establishing a business in the related key development industries of the region;
- Belonging to the urgently needed or shortage talents with special expertise in the related fields.
The relevant local authorities have stressed that any violation or false declarations made will disqualify the foreign talent from enjoying the preferential tax policy. Furthermore, they will also recover the issued tax incentives if the foreign talent is proven to be guilty.
Meanwhile, the personal income tax of foreign or overseas talents also depends on China’s IIT rules regarding tax residency. Foreigners in China are also qualified for a tax exemption on their foreign income following the provisions of the six-year rule.
Read more on Foreigners in China: How to Qualify for a Tax Exemption
Finally, the foreign talent can enjoy the said subsidy for one time each year. Moreover, if earning an income from two or more GBA locations, he or she must apply to the finance department and the subsidy will be shared by relevant local governments.
Required documents for application – Shenzhen
According to the notice issued by the Shenzhen Human Resources and Social Security Bureau, the applicant for identification as high-level talent should submit the following materials:
- Application form for the Identification of High-end Talents and Talents Short of Talents Abroad and Personal Income Tax Financial
- Original copy of passport
- Entry permit and visa for Hong Kong, Macau, and Taiwan residents
- Chinese passports, ID card and resident certificate issued abroad for overseas Chinese as well as “Certificate of Foreign Academic Degrees” for returned overseas students
- Labor contract and an employment certificate from employer whether domestic or overseas
- Business license and tax certificate of employer
- Labor service contract and personal statement for those providing independent labor service
- A copy of the temporary tax registration certificate for independent personal services
- All tax-related documents such as personal income tax payment, annual withholding tax document, and application for the annual salary form
- A bank account opened in Mainland China
Beyond the implication of the tax incentive, it appears that the foreign talents’ benefit in the Greater Bay Area is attractive for the relocation of highly paid foreign talents across China. Moreover, the tax break is also a great way to pull in more high-end workers from Hong Kong, Macau, and Taiwan (HKMT). It can be noted that income tax rates in Hong Kong, for example, are relatively cheaper than in Mainland China. Thus, the purpose of the tax incentive is directed toward eliminating such a gap.
The GBA talent mobility is a prerequisite for realizing ambitious, global developments in the area. Hence, the local governments of the region will continue to offer bigger tax breaks or incentives to qualified foreign or overseas professionals.
If you want further assistance regarding the calculation and application of your financial subsidy, you may reach out to our team of local and foreign experts. Also, visit our tax and accountancy page to see more details of our specialist services. Moreover, you can take advantage of our easy-to-use, 24-hour access management tool like Kwikdroid.
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